My Size, Inc. v. Mizrahi
193 F. Supp. 3d 327
D. Del.2016Background
- My Size Inc., a Delaware corporation traded solely on the Tel Aviv Stock Exchange, sued a group of Israeli individuals and entities alleging fraud, breach of contract and conspiracy arising from three Israel-based transactions exchanging My Size shares for Metamorefix shares.
- The Contract was negotiated and executed in Israel, written in Hebrew, and contains a choice-of-law (Israel) and forum-selection clause (Tel Aviv-Jaffa); parties dispute whether the forum clause is mandatory or permissive.
- Defendants removed the Delaware-chancery complaint to federal court and moved to dismiss for lack of personal jurisdiction, improper venue, forum non conveniens, and failure to state a claim.
- Plaintiff asserted Delaware personal jurisdiction over former My Size director Mizrahi under 10 Del. C. § 3114(b) and asserted conspiracy and in rem theories to reach the other defendants.
- A parallel action in Tel Aviv concerning restrictive legends on the My Size shares was pending and set for trial; Israeli court already ordered discovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over Mizrahi | § 3114(b) subjects nonresident director Mizrahi to Delaware jurisdiction for claims arising from his director duties | Mizrahi is nonresident but was a director; no additional dispute on statute | Court: Jurisdiction over Mizrahi proper under Delaware officer-consent statute (Hazout interpretation) |
| Personal jurisdiction over other defendants (conspiracy theory) | Conspiracy to defraud links all defendants to Mizrahi and creates jurisdictional contacts with Delaware | No substantial act occurred in Delaware; effects were in Israel and shares trade only in Tel Aviv | Court: Plaintiff failed to prove the conspiracy test's third element; cannot impute jurisdiction to other defendants via conspiracy theory (Istituto Bancario test unmet) |
| In rem jurisdiction based on stock ownership | Ownership of Delaware-incorporated stock suffices to confer in rem jurisdiction over nonresidents | Stock trading and damages occurred in Israel; mere ownership insufficient for in rem jurisdiction | Court: Rejected in rem jurisdiction; mere stock ownership does not meet constitutional minimum contacts (Hart Holding principle) |
| Forum non conveniens / enforcement of forum-selection clause | Plaintiff says clause permissive under Israeli law; prefers Delaware forum | Defendants point to Tel Aviv-Jaffa clause and show Israel is the proper, convenient forum; parallel Israeli suit exists | Court: Dismissed on forum non conveniens grounds — Israel is adequate alternative and balance of private/public factors strongly favors Israel; did not resolve enforceability of the forum clause on the merits |
Key Cases Cited
- Traynor v. Liu, 495 F. Supp. 2d 444 (D. Del.) (2007) (jurisdictional fact-pleading standard on 12(b)(2) motions)
- Provident Nat’l Bank v. Cal. Fed. Sav. & Loan Ass’n, 819 F.2d 434 (3d Cir.) (1987) (plaintiff bears burden to establish minimum contacts with reasonable particularity)
- Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61 (3d Cir.) (1984) (Rule 12(b)(2) requires competent evidence beyond pleadings)
- Istituto Bancario Italiano SpA v. Hunter Eng’g Co., 449 A.2d 210 (Del.) (1982) (five-factor test for conspiracy jurisdiction)
- Hazout v. Tsang Mun Ting, 134 A.3d 274 (Del.) (2016) (Delaware officer-consent statute § 3114 subjects nonresident directors to jurisdiction for certain actions)
- Sinochem Int’l Co. Ltd. v. Malaysia Int’l Shipping Corp., 549 U.S. 422 (U.S.) (2007) (forum non conveniens applicable where appropriate alternative forum is abroad)
- Piper Aircraft Co. v. Reyno, 454 U.S. 235 (U.S.) (1981) (forum non conveniens factors and deference to plaintiff’s forum choice)
- Lacey v. Cessna Aircraft Co., 932 F.2d 170 (3d Cir.) (1991) (forum non conveniens analysis and balancing private/public interest factors)
- Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190 (3d Cir.) (1983) (presumptive validity of forum-selection clauses and grounds for refusing enforcement)